Mortgage Modification Help – Round 2

Under the Obama administration, there’s a new form of mortgage modification help for struggling homeowners. It is designed to help at-risk homeowners avoid foreclosure through the restructuring / modification of their current loan. I’ll explain what it is and how it works in today’s post.

Mortgage Modification Help – Round 1

But first, a bit of history. At the end of the Bush term (good riddance), Congress and the White House pumped billions of dollars into our nation’s banks. The idea was that this money would trickle down to consumers. But there were no mandates or incentives given to mortgage lenders, and no transparency whatsoever. In other words, it was a blank check.

Remember all of the talk about “helping Wall Street in order save Main Street”? Well, that money did not make it to Main Street. Foreclosures rates kept climbing because the banks were not offering mortgage modification help, not the way the government wanted anyway. I guess that’s what happens when you pump money into a greed-based industry with no strings attached, eh Mr. Paulson?

Mortgage Modification Help – Round 2

Learning from yet another Bush mistake, the Obama administration is driving a new program offering mortgage modification help to consumers. This time, there’s a lot more transparency, and even a dose of incentive for the lenders and loan servicers. Here’s the gist of it.

The first question most homeowners ask is, “Do I qualify for mortgage help under this modification program?” The bottom line is that more homeowners will qualify under the new plan than under previous plans. With that being said, there are stipulations.

This program is designed for struggling homeowners who are at risk of default, due to such circumstances as job loss, mortgage payment increases, etc. People who fall into this category could have their mortgage loans modified / restructured, in order to make the monthly payments more affordable.

Here’s what you need to know:

• Your mortgage must have been originated (written up) before 1/1/09.
• The current principal amount (unpaid) must be less than $729,750 for single-family homes.
• Homeowners who qualify could have their mortgage payment reduced to 31% of gross income.
• The interest rate would be reduced to lower the payment. In some cases, the principal could be reduced too.
• Reduced payments would stay the same for five years, after which they would revert to conforming loan rates at the time of modification.
• To see if you qualify for help under this program, you’ll need to contact your current lender.
• You can also learn more by visiting the HUD.gov website.

I should stress that the mortgage modification help is only being offered to homeowners, not investors. President Obama has been adamant about this in all of his speeches. So if you’re struggling with the mortgage payments on an investment property that’s not your primary residence — don’t bother.

I’ll keep you posted as new information becomes available.